An R&W insurance policy is a contractual agreement between the buyer (or seller) and an insurance company whereby the insurance company will indemnify for losses resulting from a breach of reps and warranties and claims under indemnification provisions (including the tax indemnity/covenant), contained in purchase agreements. Each R&W insurance policy is tailored to meet the specific needs of a transaction. It is a non-renewable, single-premium product with the premium being paid upon either signing or completion of the transaction.

R&W insurance, whether purchased by a buyer or a seller, is a proven tool that allows deal professionals to bridge gaps between the parties. It shields buyers from unknown risks that can prevent a deal from closing or leave buyers with unwanted liabilities, particularly in instances where the amount or quality of recourse that the seller is willing, or able, to offer is insufficient to the buyer.

R&W insurance can give both parties more confidence in an M&A transaction, leading to a faster agreement.

With the backing of an R&W insurance policy, sellers feel less vulnerable in the representations and warranties they offer, allowing for a more fulsome scope and streamlined negotiations. Traditional indemnities for breaches of these seller representations and the need for an escrow or holdback can also be reduced or eliminated entirely, allowing sale proceeds to be distributed right away.